Registering Subsidiaries in Malaysia: Your Extensive Guide

Malaysia has increasingly positioned itself as a top destination for foreign investments, appealing to multinational corporations and emerging global enterprises. Its strategic location in Southeast Asia, strong infrastructure, multilingual talent pool, and pro-business government policies make it a natural gateway to the ASEAN region.
Foreign companies often choose to register a company in Malaysia to establish subsidiaries. This provides direct access to the Malaysian domestic market while also enabling expansion across ASEAN through Malaysia’s free trade agreements, competitive tax system, and strong regulatory framework. The country’s investor-friendly environment offers the perfect foundation for foreign groups aiming to scale their regional operations.

Definition of a Foreign Company under Malaysia’s Companies Act 2016

Under the Companies Act 2016, a “foreign company” refers to:

• A company incorporated outside Malaysia, or
• An unincorporated body, such as a society or association, that can sue, be sued, or hold property under its jurisdiction’s laws.

A critical point is that these companies do not have their principal place of business in Malaysia.

In contrast, a locally incorporated Malaysian company—whether foreign-owned or not—enjoys full access to:

• Malaysia’s double-tax treaties
• ASEAN Free Trade Agreements
• Local tax exemptions
• Industry-specific incentives

This makes establishing a subsidiary in Malaysia more advantageous for foreign businesses compared to operating solely as a foreign entity.

What is a Subsidiary Company in Malaysia?

A subsidiary in Malaysia is incorporated as a private limited company (Sdn. Bhd.), operating as a separate legal entity from its parent company abroad. This structure provides several significant advantages:

1. Limited Liability

The debts, liabilities, or legal obligations of the subsidiary do not extend to the parent company.

2. 100% Foreign Ownership Allowed

Foreign investors can fully own a Malaysian subsidiary, provided the company maintains a valid Malaysian residential address.

3. Freedom to Diversify Business Activities

A subsidiary can operate under a different name and engage in different business activities from its parent company—ideal for diversification or entering new sectors.

4. Membership Flexibility

As a private limited company, a subsidiary can have up to 50 shareholders.
This structure is one of the most preferred options among foreign companies expanding into Malaysia due to its operational flexibility and strong legal protections.

Key Requirements for Setting Up a Subsidiary in Malaysia

To establish a subsidiary, certain foundational requirements must be met:

1. Identification & Documentation

• NRIC (for Malaysians) or passport copies (for foreigners) of all stakeholders
• Details of directors and shareholders

2. Local Registered Address

A Malaysian residential or business address is mandatory for official communication and legal purposes.
(Note: A local resident director is not required—Malaysia permits 100% foreign-owned companies with foreign directors.)

3. Independent Taxation

Subsidiaries in Malaysia are taxed separately from their parent companies.
This enables them to access Malaysia’s:

• Tax incentives
• Industry grants
• Pioneer status benefits
• Investment allowances

Special benefits exist for sectors like technology, manufacturing, renewable energy, and digital services, which Malaysia prioritises for long-term growth.

Advantages of Establishing a Subsidiary in Malaysia

Setting up a subsidiary offers numerous advantages for foreign companies:

1. Access to ASEAN

Malaysia is a member of ASEAN, providing access to a combined market of over 600 million consumers and streamlined cross-border trade.

2. Skilled & Multilingual Workforce

Malaysia produces a strong talent pool fluent in:

• English
• Malay
• Mandarin
• Tamil

This makes it ideal for regional headquarters, BPO operations, tech development, and service industries.

3. Attractive Incentives

Malaysia offers grants, tax holidays, and exemptions for subsidiary companies in priority sectors, including:

• High-tech manufacturing
• Digital economy
• Renewable energy
• Biotechnology
• Logistics & supply chain

4. Business-Friendly Ecosystem

With strong connectivity, modern infrastructure, and an efficient regulatory environment, Malaysia provides a stable launchpad for regional expansion.

Steps to Register a Subsidiary in Malaysia

The registration process involves several clear steps:

Step 1: Name Search & Reservation

Using the MyCoID portal, the company secretary will conduct a name search and reserve the desired company name.

Step 2: Register with SSM

Once approved, the company must register with the Companies Commission of Malaysia (SSM) within 30 days.

Step 3: Corporate Bank Account

After incorporation, the subsidiary should open a corporate bank account to manage capital contributions and operations.

Step 4: Sector-Specific Licensing (If Required)

Industries like:

• Finance
• Healthcare
• Education
• Logistics
• Telecommunications

…may require additional licenses or regulatory approval.

A Strategic Entry Point into Malaysia & ASEAN

Establishing a subsidiary enables foreign companies to:

• Enter Malaysia legally and compliantly
• Tap into local talent and resources
• Operate with financial independence
• Access generous incentives
• Use Malaysia as a springboard to ASEAN markets

This structure offers both operational flexibility and long-term growth potential in one of Asia’s fastest-growing regions.

Disadvantages of Setting Up a Subsidiary Company in Malaysia

While highly beneficial, subsidiaries also come with certain risks:

1. Limited Access to Day-to-Day Cashflow

Parent companies may not have full visibility over the subsidiary’s internal transactions—potentially leading to mismanagement.

2. Liability Exposure from Loans

If the parent company signs or guarantees loans on behalf of the subsidiary, any mismanagement by the subsidiary may create financial risk.

3. Reputational Risks

If the subsidiary breaches local laws or faces charges, the reputation of the parent company—especially if listed or well-known—may be impacted.

Documents Required to Set Up a Subsidiary in Malaysia

The following are needed:

• NRIC/Passport copies of all stakeholders
• Proof of residential address
• Certified company particulars of the parent company
• Parent company’s board resolution authorising the incorporation
• Memorandum of appointment or power of attorney for the Malaysian representative
• Statutory declaration by the agent of the parent company

Steps to Register a Subsidiary in Malaysia (Continued)

Although the process is similar to registering any private limited company, foreign-owned subsidiaries must follow additional requirements relating to parent company documentation and authorisation.
Once the company name is approved by the Companies Commission of Malaysia (SSM), the foreign parent company has 30 days to complete the incorporation.
The incorporation fee varies based on authorised share capital.
Example:
If the authorised share capital is MYR 400,000, the incorporation fee is only MYR 1,000. Higher capital = higher fees.

Step 1: Register the Company Name

Use the MyCOID portal to reserve the desired company name. This is usually handled by the appointed company secretary.
Name approval ensures your subsidiary can operate under a legally recognised identity in Malaysia.

Step 2: Register with SSM (Companies Commission of Malaysia)

Once the name is approved, you must submit all incorporation documents to SSM within 30 days.
This includes certified copies of the parent company documents and identification for directors/shareholders.

Step 3: Office Registration

Subsidiaries must register a physical or virtual office address within 14 days after incorporation.
This address is used for:

• Official notices
• Government correspondence
• Legal documentation

Malaysia permits virtual registered offices, which helps keep costs efficient for new foreign subsidiaries.

Taxation for Subsidiaries in Malaysia

Since subsidiaries incorporated in Malaysia are considered local tax residents, they follow Malaysia’s corporate tax regulations:

Corporate Tax Rates (Malaysia)

• SMEs (resident companies with paid-up capital ≤ RM2.5 million):
  17% on the first RM600,000 taxable income
• Standard corporate tax for all companies:
  24%

Because subsidiaries are recognised as local entities, they qualify for Malaysia’s attractive incentive programmes, including:

• Pioneer Status (tax holidays of 5–10 years)
• Investment Tax Allowance
• Reinvestment Allowance
• Digital Economy Grants
• High-Tech Industry Incentives
• MSC/MDEC incentives

This tax structure is one of the key reasons foreign companies prefer setting up subsidiaries instead of branches.

Subsidiary vs Branch in Malaysia — Key Differences

Foreign companies often wonder whether to set up a branch or a subsidiary.
Below is a clear, geo-optimised comparison:

Documents Required to Set Up a Subsidiary in Malaysia (Complete List)

A subsidiary requires the following:

• NRIC/Passport copies of all directors and shareholders
• Proof of residential address for stakeholders
• Certified company particulars of the foreign parent company
• Board resolution from the parent company authorising incorporation in Malaysia
• Memorandum of appointment or Power of Attorney appointing a Malaysian representative
• Statutory declaration by the appointed agent of the parent company

These documents ensure legal compliance and transparency for foreign entities entering Malaysia.

A Strategic Gateway to Malaysia & ASEAN

Establishing a subsidiary remains the most strategic and powerful entry route into Malaysia for foreign companies. This approach provides:

• Full operational flexibility
• Malaysia tax residency benefits
• Access to local and regional incentives
• A legally recognised structure for long-term operations
• High credibility with Malaysian clients, banks, and regulators

By operating as a Sdn. Bhd., foreign companies enjoy stability, growth opportunities, and access to a market that supports innovation, manufacturing, digitalisation, and sustainability.

Conclusion: Why a Subsidiary is the Best Expansion Model

Setting up a subsidiary in Malaysia provides foreign companies with a strategic, flexible, and tax-efficient way to expand into Southeast Asia’s fast-growing markets. Unlike a branch, a subsidiary enjoys full legal independence, access to attractive tax incentives, and the advantage of operating as a Malaysian company.

With Malaysia’s:

• favourable tax environment
• strong regulatory framework
• multilingual workforce
• strategic ASEAN location
• business-friendly policies

…foreign subsidiaries are well-positioned to thrive locally and regionally.

Whether you’re expanding operations, starting new ventures, or establishing a regional hub, a Malaysian subsidiary offers the ideal foundation for long-term success.